Tuesday, August 25, 2009


Economists are debating the question of whether the current decline in the US economy will result in inflation or deflation. Some believe that we will go into a downward spiral of depression era price deflation as the economy continues to decline and everything becomes cheap. Others believe that the government will hyper-print money and hyperinflation will result.

I am not sure what type of inflation we will get, but one thing is for sure - we will have inflation to deal with in the coming years. This country has way too much debt for any other outcome but inflation.

What can a country do if it has too much debt? What can a country do if they are taking in one trillion dollars a year and spending two trillion? There are four things a country can do to reduce debt to a manageable level:

1) You can pay back the debt. This is not going to happen. Strike one.

2) You can go bankrupt if you have too much debt and cannot pay it back. Not gonna happen in the US. Strike two.

3) You can grow your way out of debt through increased productivity and economic policies that promote growth through lower taxes on businesses and individuals. Not this administration. Strike three - you are out.

4) The only thing left is to inflate your way out of debt. Inflation is a monetary animal that is fed with more and more dollar printing. Devalue and print the dollar. Debt is then reduced.

Inflation is coming to a town near you. Got any oil? Got any gold?